01—Abstract
Summary
Summary of the 10-Q filed October 20, 2016. Cited figures are marked; the original filing is the authoritative source.
KLA Corporation (KLAC) reported strong financial performance for the quarter ended September 30, 2016, with total revenues reaching $750.7 milliona, a 17% increase year-over-year.
This growth was primarily driven by a significant rebound in product revenues, up 22% from the prior year's comparable quarter, and a steady increase in service revenues. The company's gross margin improved to 63.0% from 57.9% in the prior year, reflecting improved product mix and revenue volume. Net income for the quarter was $178.1 millionb, translating to a diluted EPS of $1.13, a substantial increase from $0.66 in the prior year.
This improved profitability was supported by disciplined expense management, with R&D and SG&A expenses growing at a slower pace than revenue. The company also benefited from a lower effective tax rate, partly due to the early adoption of new accounting standards for share-based payments. The company ended the quarter with a strong liquidity position, holding $2.49 billionc in cash, cash equivalents, and marketable securities.
02—Key points
Key Highlights
- Total revenues increased by 17% year-over-year to $750.7 million.
- Product revenues saw a significant 22% year-over-year increase, driven by strong demand in Asia.
- Gross margin improved to 63.0% from 57.9% in the prior year's quarter.
- Net income surged to $178.1 million, up from $104.9 million in the prior year's quarter.
- Diluted earnings per share (EPS) rose to $1.13 from $0.66 year-over-year.
- The company ended the quarter with a robust liquidity position of $2.49 billion in cash, cash equivalents, and marketable securities.
- KLA Corp. announced on October 5, 2016, the mutual termination of its merger agreement with Lam Research Corporation, with no termination fees payable.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed October 20, 2016Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Revenue | $750.67M$642.64M | +16.8% |
| Cost of Revenue | $277.84M$270.24M | +2.8% |
| Gross Profit | $472.84M$372.40M | +27.0% |
| R&D Expenses | $129.23M$119.94M | +7.7% |
| SG&A Expenses | $94.39M$91.66M | +3.0% |
| Interest Expense | $30.73M$30.56M | +0.5% |
| Net Income | $178.10M$104.90M | +69.8% |
| EPS (Basic) | $0.11$0.07 | +70.1% |
| EPS (Diluted) | $0.11$0.07 | +71.2% |
| Shares Outstanding (Basic) | 1.56B1.57B | −0.4% |
| Shares Outstanding (Diluted) | 1.57B1.58B | −0.6% |
05—Questions
Frequently Asked Questions
What is KLA Corp.'s primary business and how does it generate revenue?
KLA Corp. is a leading supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Its revenue is generated from the sale of systems (products), spare parts, and related services (maintenance contracts, billable time and material service calls).
How did KLA Corp.'s revenue performance compare year-over-year for the quarter ending September 30, 2016?
KLA Corp. experienced strong year-over-year revenue growth, with total revenues increasing by 17% to $750.7 million. Product revenues, a key driver, increased by 22%, while service revenues saw a more modest 4% increase.
What is the significance of the termination of the merger agreement with Lam Research?
The mutual termination of the merger agreement with Lam Research, announced on October 5, 2016, removed a significant strategic uncertainty for KLA Corp. Since no termination fees were payable, it allowed the company to focus on its standalone operations and strategy moving forward without the distraction and potential integration challenges of a merger.
How did KLA Corp. manage its expenses during this period, and how did it impact profitability?
KLA Corp. maintained disciplined expense management. While R&D expenses increased by 8% year-over-year due to increased headcount and consulting, and SG&A expenses increased by 3%, these increases were lower than the revenue growth. This expense control, coupled with revenue growth and improved gross margins, led to a substantial increase in net income and diluted EPS.
06—Continue